Park-Owned Homes: Profit Center or Recipe for Disaster?
If you hang around mobile home park investors long enough, the conversation will eventually turn to park-owned homes.
A lot of park owners hate them. Read on to see how we feel about them.
Park-owned homes are mobile homes the owner has purchased, usually to rent to tenants.
To know whether park-owned homes are a good idea, first we have to consider a real estate term called “highest and best use.”
Highest and Best Use: Mobile Home Park Spaces
If you have a mobile home park with vacant spaces, you may have options you haven’t considered. For example, let’s say your mobile home spaces lease for $300 a month. You have a vacancy. You could advertise the vacant space and move in a tenant who owns his own trailer.
You’d make $300 gross revenue.
Or, you could buy a mobile home and put it in the vacant space. That might make you $900 a month in gross revenues. You essentially triple your revenue for the same piece of land. Once the mobile is paid off, you stand to make a very nice return on investment.
What’s the Catch?
A lot of people and even seasoned mobile home park investors will tell you to avoid park-owned homes. These people are not a bunch of yahoos. They generally tend to be a very smart and savvy group of people. So, why would they tell you to avoid buying mobile homes if you can make so much more revenue?
One of my favorite sayings is, “Every benefit has a cost.” It reminds me I’m not going to get anything good unless I invest and pay the cost. This is true in every business, especially the mobile home park business. But, I’m not talking about the cost to buy the trailer (another term for mobile homes).
I’m talking about the cost to repair the trailer after the tenant moves out.
In fact, one of the reasons I swore off this business as a kid was because of all the trailers I had to clean up and rebuild that were absolutely, positively trashed.
Close your eyes and picture stained carpets just reeking of cat urine, kitchen cabinets covered with food and sticky grease, broken windows, holes in the walls, holes in the interior doors, and my favorite part – bathrooms that would gag a maggot.
You can only guess what happens to all the profit (and part of your own money) when you get a trailer back in that kind of condition.
Let’s just say your wallet or purse will be a little lighter at the end of the day.
Before I completely scare you to death about park-owned homes, let me share a little secret with you. My family really likes absolutely loves them. I know. It sounds crazy… (and yes, I put a line through “really likes” to make sure you understand how much they love park-owned homes).
The Counter-Intuitive Catch
If you want to increase your income with park-owned homes, you are going to pay a cost.
Here’s the kicker. Cost doesn’t always mean money.
If you are willing to invest the time to learn how to really manage your mobile home park like a professional (or learn how to hire someone who will), then you can make park-owned homes a profitable part of your mobile home park business. The cost is the time you spend investing in your education and the application of what you learn.
I can’t say exactly when because we are still putting the final touches on, but I will be releasing the Mobile Home Park Property Management Module soon. I’d love to just release it now, but we keep thinking of more cool stuff to put into it that will help you. And…
My family has been actively involved in the mobile home park business for 40+ years, which translates into a lot of systems and processes to capture and put into the Module (and I’m a bit of a perfectionist, which can be a real pain when you are trying to get something done on a tight time-line… I’m not bragging, being a perfectionist is a curse).
Alright, enough ranting. Make sure to stay in touch and watch your email because I think I might leak some videos from the course. And if you’re wondering why I’m not releasing the module on buying and selling a mobile home park first, then check out this post on the mobile home park property management course where I explain why.
Is there anything you’d like to know about owning and leasing park-owned homes? Comment below and let me know.